What's in a name? Plenty, says Mike McKevitt of the National Federation of Independent Business, if the name is "small business" and the stakes are $10 billion yearly in federal contracts. In today's Federal Register, the Small Business Administration is scheduled to publish an advance notice of proposed rule-making that redefines what makes a business small. "Historically this has been a can of worms for the SBA," said McKevitt. The agency ventured forth on this subject two years ago but dropped its proposal after receiving 1,500 comments, most of them critical.
The problem, said Andrew A. Canellas, director of the SBA Office of Industry Analysis, is that the current system is too confusing. Whether one of the nation's 5.3 million firms qualifies for the $10 billion in federal contracts set aside annually for small businesses depends on a variety of factors, including the number of employes, the sales volume, and net worth. In addition, different SBA grant programs have different qualifying standards.
SBA's new proposal is a blanket standard that would apply to all federal agencies; it lowers from 1,500 to 500 the maximum number of employes a business can have and still qualify as small. Businesses in certain industries would have lower ceilings. If those changes take effect, 98 percent of the nation's firms would still be called small businesses; 99 percent of them are called small businesses under today's rules, but only a few compete for the so-called set-asides. "Basically this is a simpler, more rational approach," Canellas said.
McKevitt disagrees. He said his organization has no problem with the lower ceiling of 500, which would channel more federal funds to smaller firms. But, he said, the proposal has been "drawn up by bureaucrats, many of whom have never worked in a small business." McKevitt called the SBA proposal an "oversimplification of an intricate, complex process." The SBA will be taking comments on the standards for the next 90 days before drafting a formal proposal and holding public hearings.